Debt: how to move from red to black

I am – obviously enough – not well off. But I am never in debt. I do have a credit card but I pay it off in full every month – even if it means dipping into savings. This does make financial sense but it also helps with my peace of mind: I have a real fear of debt. I’ve know people over the years who dread the sound of the letterbox going because of the final demand notices landing on the doormat. That’s no way to live. But then, it’s so easy to get into a circle of debt what with (often expensive) credit so easy to get.

The Money Advice Service said this week that 8.3 million adults in the UK have problem debts. Debt charity StepChange says the average debt of those people it helps was £14,367. If you paid that back over five years and got an interest rate of 5%, then it would cost you £271 a month and you’d end up paying back more than £16,260 in total (I used this calculate). That’s assuming you’ve got a personal loan with a rate of 5% which admittedly is far higher than the best on sale at the moment (which is closer to 2.8%) but probably closer to the rate most would get.

But I guess if you are in debt then you might not be sorted enough to have a personal loan – or might not be able to get one easily. Using a credit card to borrow money is fine if you pay it off before paying interest or move to a 0% deal and ensure you use that time to get out of the red. But if you haven’t got a low interest rate deal you could pay more than 18% annual interest on it. At that rate, the debt is going to grow really fast – particularly if you only pay the minimum monthly payment. Overdrafts are dangerous too: and what’s more, working how much they charge for unauthorised overdrafts can be complicated as many are moving from charging interest to flat fees.

So how do I avoid debt? Basically, I do without. This is bloody hard sometimes, particularly when you have an 11 year old nagging for the latest version of Fifa (nearly £50!) and also when you really want a pair of posh wellies for walking in the muddy woods and some expensive Aveda shampoo (£58!) for your hard-to-manage curls. So we are on an economy drive at the moment – the heating is staying off for as long as possible and we are eating a lot of pasta. It is difficult but as the season of conspicuous overspending is on the way, I want my finances to be in the pinkest of health rather than the deepest red.

Our guide here is invaluable for showing how to get out of the red. And check our our new guide to saving money shopping here.